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USD/CAD Hangs on After US and CAN Data

The USD/CAD has been consolidating in February, but showed a bullish breakout earlier this week. In the 4H chart we can see that price broke above the triangle resistance, but after tagging 1.2660 it retreated back towards the triangle support. It did not go to 1.2350-60 support area, but rather hung out above 1.24 before today's US and Canadian data. Let's take a look at the data first:

US headline CPI came in at -0.7% m/m in January, which is lower than the -0.4% in December, and right around forecast which called for a -0.6% reading. The core reading came in at 0.2% vs. 0.0% previous and 0.1% forecast. We know that oil prices did not stabilize until late January and into February, so the negative headline inflation data is not so bad. The core reading was positive and that's what mattered. Jobless claims data disappointed with a reading of 313K vs. forecast of 288K and the previous week's reading of 283K. Not to be alarmed, jobs data has been trending better, so unless we get another 2-3 weeks of above 300K reading, there's nothing to worry about. Finally, durable goods came in at 2.8% in January, which was up from the -3.3% reading in December, and also better than the forecast calling for a reading around 1.7%. The core durable goods readings (excluding transportation), came in at 0.3% vs. forecast of around 0.6% and a previous reading of -0.9%.


(US CPI m/m; source: forexfactory.com)


All-in-all, US data was not impressive nor disappointing. Meaning, if the USD was weak it might provide an intra-session pick-up. If USD were strong, it would be a bit of resistance. Let's take a look at Canadian Data:

Canadian headline CPI came in at -0.2% m/m in January, which is higher than the -0.7% in December, and the forecast for a reading around -0.4%. The core reading came in at 0.2%, bettering the -0.3% in December, and the 0.1% forecast. This might be slightly positive for the CAD, but would be enough to drag USD/CAD lower? 


(CAN CPI m/m; source: forexfactory.com)


The answer was "no":
USD/CAD 4H Chart 2/26
(click to enlarge)

As we can see in the USD/CAD chart, the pair was holding above 1.24, and then rallied after the US and Canadian data. So far, the pair has remained neutral-bullish and avoided the outlook for further bearish correction. However, the data does not convince me that there is enough fuel for USD/CAD to propel back into bullish continuation mode, at least not based solely on today's data. If it rallies, it is off of its prevailing bullish momentum before February's triangle. But if price fails to close above 1.25 today or tomorrow, the pressure remains on the 1.2350 triangle support next week. A close above 1.25 should maintain the overall bullish bias and put 1.2660 in sight. Above 1.2665, the 1.28 area will be exposed.

However, if price fails to cross 1.25, and breaks below 1.2350, we have the 1.21 level in sight. There was a very brief consolidation around this level. We should limit the bearish outlook to the psychological level of 1.20, where we have the resistance of a recent consolidation during mid-January.